Government Intervention Will Not Be Necessary When Voluntary Contracting Internalizes

question 230

Multiple Choice

Government intervention will not be necessary when voluntary contracting internalizes an externality. Which of the following is NOT a necessary condition for this to occur?

• A) well-defined private property rights
• B) low transaction costs
• C) large numbers of individuals involved in the transactions
• D) low contract enforcement costs

---

Definitions:

Budgeted Production

The planned level of production output, calculated based on demand forecasts and inventory requirements.

Direct Labor Budget

A financial plan that estimates the cost of direct labor required to meet production goals, taking into account wages and hours.

Budgeted Costs

Estimated expenses planned in advance for a specific period, often used as targets or benchmarks for actual performance.

Direct Materials Purchase Budget

A budget estimating the raw materials that need to be purchased to meet projected production demands.